With the continuing cuts to US Food and Drug Administration (FDA) staffing, the pharmaceutical and biotechnology industries are communicating increasing concern about potential product development impacts. While these cuts and their subsequent effects may be leading some companies to consider developing drugs abroad, such ex-US development can come with risks, necessitating upfront planning and compliance controls.
In February 2025, probationary workers at FDA were fired as part of the staffing cuts across the US federal executive branch. While some employees were subsequently asked back, on March 27 the US Department of Health and Human Services (HHS) announced a departmental consolidation and reduction in work force of 10,000 people, which may impact 3,500 full-time FDA employees—about 19% of the agency’s workforce. Altogether, HHS stated that “when combined with HHS’[s] other efforts, including early retirement and Fork in the Road, the restructuring results in a total downsizing from 82,000 to 62,000 full-time employees” across the department. This consolidation and reduction in work force was initiated on April 1.
In reaction to the February cuts, hundreds of representatives of the biotech community signed an open letter stating that the reductions will “threaten and delay the approval of new medicines,” which will disproportionately impact smaller biotechnology companies “that represent more than 70% of phase 3 trials[.]”
While FDA staff that conduct product reviews are exempt from the cuts, sources within the medical products industry have indicated to the trade press, such as the Pink Sheet, that it has become more difficult to communicate with FDA staff and that there are significant concerns that there may soon be product review delays. As a result, it has been reported that companies may consider developing drugs in other countries before pursuing US approval.
Development of drugs outside of the United States is nothing new, as companies frequently conduct multinational clinical trials to boost enrollment, especially in the case of rare diseases. Moreover, the FDA cuts do not change the process or preclude US-based product development, and US development can provide significant regulatory and commercial advantages. Companies considering foreign product development will need to weigh strategic regulatory and commercial considerations requiring significant planning, especially if they intend to sell in the large US market.
Recently, FDA has emphasized the importance of clinical data being representative of the US patient population.[1] This requires careful consideration of the enrolled trial population, accounting for differences in demographics, lifestyles, medical practice, and standard of care. Should FDA decide that foreign clinical studies are not sufficiently representative of or meaningful to the US population, it could require sponsors to conduct one or more US-based clinical studies or enroll subgroups of US subjects in existing studies.
Sponsors conducting clinical trials abroad should be prepared to justify the clinical relevance of foreign participants to the US population and may need to plan for additional study requirements. Early engagement with FDA (which may be more difficult given the staffing cuts) can help mitigate these risks or at least ensure that companies understand and can plan for FDA data expectations to avoid last-minute surprises and unplanned costs.
While FDA may accept foreign clinical data, the data must meet FDA’s good clinical practice and data integrity standards, which FDA frequently verifies through information-sharing collaborations with foreign regulators, including those in the European Union, United Kingdom, Japan, and Canada. Whether such coordination will continue is unclear.
Foreign data can present increased challenges for both sponsors and FDA, especially if FDA does not have the ability to verify good study conduct through work with international partners. By example, in 2021 FDA raised significant concerns regarding the validity and reliability of data generated at two Indian contract research organizations that resulted in a number of companies needing to redo trials, even after products were approved.
In light of the administration’s “America First” policies, FDA may also be more skeptical of foreign data. To help mitigate these risks, companies contemplating foreign studies will have to undertake increased site selection diligence and site monitoring to ensure sites are experienced, properly staffed and trained, and are able to meet regulatory requirements as well as conduct trials in a compliant manner.
Companies must also be prepared to demonstrate to FDA that foreign studies and study sites meet FDA’s quality expectations, especially if FDA’s current collaborations and information-sharing initiatives with international regulators begin to breakdown.
Companies contemplating conducting clinical trials outside of the United States will also need to consider a number of strategic factors that may impact long-term global product prospects. Previously, many companies conducting clinical studies abroad would voluntarily open a US Investigational New Drug Application (IND) because, while not required, having a US IND can facilitate FDA acceptance of the resulting foreign study data and open regulatory doors to studies and approvals in additional jurisdictions.
FDA, however, is not required to open an IND for an exclusively foreign clinical study. Accordingly, FDA may decide to no longer dedicate its limited resources to the review of INDs for foreign studies with no contact with the United States. Such a change would mean that sponsors no longer have early opportunities for FDA engagement and regulatory advantages abroad. Such a change may also occur without notice, given the HHS’s recission of its policy to use rulemaking for management and operational policies.
As with most strategic regulatory decisions, companies weighing conducting clinical programs abroad and seeking initial marketing approvals for non-US countries will need to consider potential implications for future FDA marketing exclusivities and approvals. For instance, a number of FDA’s marketing exclusivities are contingent upon a product being the first approval in the United States. Companies directing their attentions to other jurisdictions could find that a competitor has beaten them to US approval. Under such circumstances, sponsors may find that they have lost out on opportunities for US exclusivity protections and are also blocked from receiving US approvals for a number of years.
Moreover, companies initially looking abroad will need to align their clinical trial and regulatory approval strategies with their patent-filing strategies as early as possible and before trials begin. By example, lifecycle management patent filings, which often cover trial-specific details, will need to be coordinated with company regulatory and approval plans to help ensure adequate and appropriate intellectual property coverage in both of the jurisdictions where trials will take place and where approvals may be sought.
Moreover, many jurisdictions also have working requirement rules—with more every year—for commercialized as well as pre-market products and processes. Understanding the various rules for the jurisdiction(s) in question is critical to ensuring adequate and appropriate intellectual property coverage.
Organizations undertaking offshore clinical trials, particularly those involving trial participants resident in the UK, European Economic Area, and Switzerland (collectively, Europe), will need to consider necessary steps for cross-border data transfers, including under the EU and the UK’s General Data Protection Regulation (GDPR). This is of particular importance given the enhanced data protections under the GDPR that apply to the health-related personal data of individuals resident in such jurisdictions and the associated increased regulatory enforcement risk with transferring such data to the United States and other jurisdictions outside Europe. Similarly, clinical trials occurring in Asia may also be subject to local data protection restrictions.
By way of illustration, among other requirements, organizations intending to transfer trial participant–related personal data from Europe will need to ensure that these transfers occur under specific GDPR-approved legal mechanisms. Relevant data transfer mechanisms under the GDPR include (1) the data exporter and the data importer entering into model/standard contractual clauses (i.e., international data transfer agreements) approved by the European Commission and/or the UK Information Commissioner’s Office and (2) US companies certifying to the EU-US Data Privacy Framework, Swiss-US Data Privacy Framework, and/or the UK-US Data Bridge.
Companies conducting clinical trials abroad and first seeking marketing approval in ex-US jurisdictions will likely establish manufacturing capabilities outside of the United States. Such supply chain decisions, however, can have significant implications when companies seek to obtain approval for and subsequently import products into the United States. Tariffs on Canada, Mexico, and China, as well as threatened tariffs directed toward pharmaceutical imports, could raise the costs of bringing product into the country when such products or their active ingredients are manufactured abroad.
Foreign manufacturing can also increase good manufacturing practice (GMP) compliance risks, which can jeopardize future US approvals. Accordingly, sponsors would be well advised to exercise heightened scrutiny of foreign manufacturers through established systems of vendor and quality controls.
Increasingly, US companies have been looking to foreign countries, and particularly China, to identify and in-license potential drug candidates. Even if further development would be taking place in the United States, the data generated outside of the country for these investigational products may be subject to increased FDA scrutiny. Sponsors looking abroad for new drug candidates would be wise to thoroughly diligence studies and data, with a particular focus on those that will be used to support FDA regulatory decisions.
Companies considering foreign clinical trials will need to be prepared to navigate complex regulatory, trade, and compliance challenges. As such, companies looking abroad must carefully weigh the costs and benefits of such foreign development programs and undertake proactive planning to ensure that compliance programs are tailored to meet the added complexities and risks.
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[1] See Considerations for Generating Clinical Evidence from Oncology Multiregional Clinical Development Programs Guidance for Industry (Sept. 2024); Diversity Action Plans to Improve Enrollment of Participants from Underrepresented Populations in Clinical Studies Guidance for Industry (June 2024); Guidance for Industry and FDA Staff: FDA Acceptance of Foreign Clinical Studies Not Conducted Under an IND Frequently Asked Questions.